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Report from NCVO and Bates Wells finds significant flaws in design and implementation of Payment by Results contracts

October 2013

An analysis of a sample of payment by results (PbR) contracts held by voluntary sector providers is presented in a new report from NCVO and Bates Wells:

Download 'Payment by results contracts: a legal analysis of terms and process’ [PDF, 3MB]

As PbR has developed across public service markets, we have seen widespread concern from the voluntary sector that a number of contracts being implemented are poorly constructed, do not incentivise the right outcomes, and do not enable service improvement and quality. 

To get insight into these problems, NCVO asked Bates Wells to carry out an analysis of a sample of PbR contracts held by voluntary sector providers, and to interview these providers.


The findings include:

  • payment targets which incentivise activities which are disconnected from, or sometimes detrimental too, the end outcome
  • cash flow and working capital requirements with have meant providers have been subsidising their PbR work with other income sources
    • limiting the amount of other services they can deliver
    • having to seek loans to cover payment delays
  • contracts which have bolted on PbR as a payment mechanism, but which have retained prescriptive terms which say how the service should be delivered. The provider gets the financial risk associated with PbR, but none of the freedom to innovate
  • commercial pressure for voluntary sector providers to not report problems is masking structural flaws with the use of PbR for the voluntary sector
  • a lack of learning, evaluation and flexibility in the implementation of these models.

The report makes recommendations to commissioners considering using PbR, and also advises voluntary sector organisations on what to look out for when signing PbR contracts and what demonstrates bad practice.

Download ‘Payment by results contracts: a legal analysis of terms and process’ [PDF 3MB]

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